But Tapis did hit $151
Printable View
But Tapis did hit $151
$151.78 now.
The question is: how long will it take to shake out all the weak NZO holders, e.g. those who have mortgaged everything - perhaps even including the wife - to load up? My guess is that the bulk of this sort of selling will taper off over the next two weeks.
People are talking about the weak world economic outlook driving down the demand for oil; well, have they seen the latest official forecast for the Chinese GDP growth rate? Yes, its down from last year's 11.2% to.............9.8%. (I'm going from memory here, but check it out).
And you can be quite satisfied that, in arriving at this figure, China has taken due cognisance of the expected fall-off in demand from the USA, etc., for Chinese exports.
Imagine what a projected growth rate of anything like 9.8% for NZ would do for Alan Bollard's blood pressure!
If coal prices continues to fall over night, PRC sp may weaken further which will have an impact on NZO sp. May even see NZO back down to $1.50.
Everyone is on the edge out there. A very nervous market indeed.
so what is everyone doing here with your NZO holdings?
I am sitting on an average price of $1.635. Not loving that it hits 1.91 yesterday and now it's down so low.
Does anyone else have that conflict of knowing it's fundamentally a sound company but not wanting to dip into a loss making position.
I bought mine for longer than 4 days so am quite relaxed about things.
Fundamentally sound or not a falling tide lowers all ships. Take a look at previous market crashes everything dropped when the panic sets in. The point is do you think the fundametals are stronger than the panic selling?. If you are into TA you might consider selling to buy back at a lower level.
Everything right now is in the lap of the gods its decission time my friend the sp is controled by market sentiment with fundamentals running a distant second. Macdunk
Floor should form soon you would think, everyone remember, oil is at $151 USD.
Lets get real, you don't sell a company that owns that.
Both fear and greed are rampant in the owners this stock it would seem - hence the volatility.
disc - long a lot.
whats the problem?
the smart money is still hoovering up NZO shares.
they might even be helping the price down by dumping small pockets of stock.
the punters, the gamblers, the kitchen sink chuckers are just scrambling.
NZO is and will be in the money permanantly for here on out.
unless poo goes down to $40-50, and if that happens, you have bigger things to worry about.
this sp movement and "betting" is starting to remind me of pokerstars. net
Agreed neopole, hopefully NZO can release their June quarter numbers pretty quickly (should be 31 July at the latest). The market will have to sit up and take notice then when they see that NZO's main problem at the moment is finding a room big enough to store their cash profit.
Until then we may be in for a rollercoaster ride.
Its called volatility...stocks dont go up all the time!
Sure it was nice to see i was up a lot more yesterday on every single stock i own, but market weakness finally hit everything...but yes, it does hurt when its such a large drop..i think my whole portfolio is down 10% on what it was 2 days ago..but again, its been like that earlier in the year and is just volatility.
Be brave when others are afraid.Its a buying opportunity.
there used to be a time when USA caught a cold the rest of the world sneezed, and in alot of respects that is still true. but when it comes to oil and gas the USA can sneeze all it likes, and china and india will still purchace as much oil as it can get.
NZO produces oil............
this must be one of NZ's only safe havens for capital, the bigboys know this, and use the lack of knowledge of the punters to hoover in the cheap shares of NZO.
oh well...... off to the lotto shop again.
It is scary watching everything drop but in the last 3 days i sold everything but NZ) and bought more NZO with the profits. So my portfoilio is now 90% NZO. Sure I average 1.65 but I am able to sit this out and no matter what happens in the short term, the fundamentals will win out in the long term. So no panic on my side. We are on to a winner guys. Just hold on don't panic. If it drops much further i will be buying even more.
well the guys complaining about tv 1 not covering nzo or pike in thier business news your day has arrived,coal prices retreating and nzo and pike shares taking a hit was the headline
Maybe the general public will notice that there's a figure 2 in front of the price, whereas only a few weeks ago there was a 1!
a single investor can sway a share though,ive often wondered whether sites like this are looked at by people in the big world of influence,afterall its the market that decides the price of a company and we are all part of that market
Most holders will be holding thats why they own the stock not to trade it
Some weeks ago i posted that i thought the price would not really take off until August.I was sure suprised to see it shout to 1-91 and now it has returned to about where it should be given the heavy committments many holders have. Now i am wondering if the price will be forced down to trigger a lot of stop losses. I exercised all my options but arranged monies through the bank and my house sale as i did not want to get in to the margin skid if it should be triggered,and it can even if the fundementals are excellent in the longer term.This company is becoming big money and the big money boys can and usually play dirty. Some consolidation from 1-91 was in order but it now is looking more like a down plan.Remember ACC played a down plan in the last weeks of options trading so this company is attracting these sorts of tactics.
I will be as always focusing on the developments and holding until one year after kupe is producing.Judgment time is then not this intermidiate stuff.That is where the gold is and expect this company to have a fight on its hands to find the owners. Hold tight we are in for some ups and downs.
90% of option had been exercised, only one big brother ACC declared holding a little bit more than 5%. Where have the shares been gone?
Where could you find a similar size of company like this one has about $200M in the bank? (Almost 1/3 of its market share price is cash)
Yes - I guess my comment was from my own myopic point of view - not leveraged here and no margin calls on me.
Now.. I'm concerned. NZO is fine, and I don't are about my long term holds - Don't even care if the NZX 50 goes below 3000 (or did it today? I've been on the move) BUT -- well, I don't know - the whole world situation feels like it into another major league meltdown. No traffic jams in town anymore - why is oil stil high? And two worlds are going to collide over U235 production in Iran. And is there anyone left with the cash or letters of credit when commodity contracts are called? What is the timing for the coming oil price collapse? (Latest article in the New Scientist accepted).
We live in interesting times.
I brought the bit up about NZO and PRC topping the percentage lift each day but no mention on the news. With NZO and pRC being 1 and 2 on the preformance rating in the last 6 months you can be sure a fair amount of tall poppie stuff is flying about. It would be a releif to there jealousy to be able to report that these two stocks fell today.I would say to there envious nature that if they were only allowed to report on these two stocks from the point of there last report then both companies went up considerably.
duncan.. i cannot beleive i am saying this but for once you are right. In times like this fundamentals go out the window. Nervous nellies with stop losses, highly levered, day traders and wanna be long term investors get a panic attack and they are gone. If nzo gets below $1.50 then margin lenders will hit the panic button only to be mopped up by the astute investor.
I think i said it yesterday or the day before. If you are in it for the medium or longer term then one should not be watching the sp movement on a daily basis (especially if they are influended by such movement). pyscologically they will get sucked in and spat out in bubbles. If it was a house would you sell if you read in the newspaper that the price of your abode dropped 20% in one year or 10% in 1 month? of course not. If you have something that is fundamentally sound then stick to fundamentals. If you are influenced by trading patters etc then forget about fundamentals.
I put nzo bottom at $1.20 at present for nzo. Meaning i have no intention to sell no matter what the oil prices do crash (eg drop 40%) in a month which is possible. That is why i dont care if nzo drops 40 cents tomorrow unless i am going to sell.
Im hoping for oil to correct to about $100 to $120 to stablize world markets which will benefit all (including nzo holders) for the medium term.
go nzo and proud to be a holder.
.
Where will it all end ??
(And this graph does'nt include the May and June prices up to and above US$140 !!)
http://www.oilnergy.com/hpix/2obrentm.gif
In tears ????
.
Zorba. nice graph.. Its very hard to imagine that prices are going to go sideways for the next 12 to 24 months.
NITA the very worst thing has happened when the price of oil shot up in price. People cant afford to buy it demand drops. Alternative solutions get explored with the likelyhood of a new discovery discovered sooner rather than later. The world economy will take a massive hit leading to a greater chance of conflict. All ships drop in a falling tide as you are now starting to realise.
We are in for a share market crash NZO will drop in share price other companies will go to the wall nothing good will come from the rising price of oil other than disaster. I battened the hatches at the start of this year, stuck my storm sail up and tossed my sea anchor out much to the disgust of the blue eyed brigade. Macdunk
Macd - this blue eyed brigade member is ecstatic. I told you to buy at $1. I told you at $1.10 your 30 day ma indicator was triggered. Even with the selloff I am up 67% or so - out performing the market by around 100%. Surprisingly I do not give a toss about your anchor. I was also wondering how the Ian Israel potential conflict & the possible loss of 40% of the oil delivered to market, although a fundamental item, is not more relevent than the TA signal of an overbought, over extended oil price chart? I am also picking strong bargain hunting as soon as the short term profit taking from the short term option converters is over.
Also another fundamental I cannot ignore - In August FPA, FPH etc etc will report profits of FA & NZO will report $200m or so. That will be hard even for the analysts to ignore!
Go the blue eyed brigade enjoy your fundamental profits - or maybe consider switching to a manufacturer with a good TA signal?
Hey, TA got me into PRC back when it was in the dollar range ;)
I haven't been in the markets for long, but when something has risen as fast as PRC or the POO, then we get a big increase in volatility. One of these days oil will decline by something like $15 in one session after gaining $30 the previous week. I saw it on the chinese markets, the hang seng, and now we'lre seeing it in coal.
NZO looks back to normal today. Meanwhile:
http://www.stuff.co.nz/4607492a13.htmlQuote:
Oil hits record over US$145
Oil has rushed to record over US$145 a barrel ahead of the US independence Day holiday, extending a rally that has added 50 per cent to prices this year.
Escalating tensions between Israel and Opec nation Iran have pushed prices to fresh peaks over the past two weeks, with further support coming from speculators hedging against inflation and a weakening dollar.
The US oil settled up US$1.72 at US$145.29 a barrel, after earlier hitting an all-time intraday high of $US145.85. London Brent settled at US$146.08, up US$1.82 after reaching an intraday record of $US146.69 a barrel earlier.
"On a long weekend, no one wants to take the risk of being caught short with all the tension between Iran and Israel," James Crandell, analyst at Energy Research in New York.
Iran has threatened to block oil shipments through the Strait of Hormuz in the event it is attacked. Speculation has mounted in recent weeks that Israel may be preparing a preemptive strike against Tehran's nuclear programme.
Approximately 40 per cent of the world's seaborne crude oil trade passes through the Strait of Hormuz.
The new crude oil record came just ahead of the Fourth of July holiday weekend, traditionally the peak driving period for motorists in the nation's largest oil consumer.
Oil has risen nearly 13 per cent since the start of June on concerns about Middle East tensions, tight supplies and investors buying crude as a hedge against inflation and the falling value of the dollar.
Crude futures have surged seven-fold since the start of 2002 as supply struggles to keep pace with demand from emerging nations like China. The price spike has caused fuel protests around the globe and hurt demand in consuming nations like the United States.
Saudi Oil Minister Ali al-Naimi reiterated his belief on Thursday that the current rally in oil prices was being propelled by speculators rather than any shortage of crude oil.
Naimi repeated promises that Saudi Arabia would pump more oil if there was demand for it.
Oil refiners in the United States and Asia have said official Saudi prices make it uneconomical to buy more barrels.
US payroll data released Thursday suggested the job market had not deteriorated as much as many investors had feared, helping the dollar recover from a two-month low against the euro hit earlier in the day.
Comments from the head of the European Central Bank that suggested further interest rate increases in Europe could be put on hold also supported the greenback.
Tropical Storm Bertha, which formed on Thursday in the eastern Atlantic Ocean, was not expected to threaten any US oil and gas production facilities in Gulf of Mexico.
Hurricane experts have predicted an above-average number of storms and hurricanes through the US hurricane season, which began June 1 and runs through the end of November.
Upstream is showing the tapis price at US$153.07.
NZ$202 a barrel for NZO
45,000 x 202 = $9,090,000 for JV...
At 12.5% = NZ$1,136,250 per day for NZO (NZ$414,731,250 for NZO p/year at current rates).
Anyone have any idea what NZO's share of the costs would be? Less than $100k a day I'm sure.
My reading of the yesterday's coal market activity was that it only applied to thermal coal - for power station use. Coking coal prices although influeneced by the thermal coal price (i.e. they will always be higher) were not mentioned in market action. The coking coal sale price is largely set by the annual negotiations which have just set it at USD300 a tonne - spot prices have been higher. There is no world shortage of thermal coal expected in the next couple of hundred years - just greeny concern and mining and port capacity.
Coking coal will be in short supply until steel making by traditional means becomes too expensive.
The sharp corrections you mention tend to be temporary unless accompanied by other measures that remove liquidity from all markets. The chinese have raised interest rates and bank deposit rates heaps.
Hey argonaut,Quote:
argonaut-Shrewdie - perhaps NZO might be a good place to put some funds recently released from the sale of a somewhat languishing high risk ASX/AIM dual listed resource stock?
I now understand... Im real proud of you...
re-invest two months before spud...
put those funds into NZO?
perhaps you could, its the most undervalued NZX stock...
This will not be a cash cow... This will be a cash Cow with its whole family...
brothers, sisters and the whole barn yard...
I like the look of CUE... Maari for CUE will perform better than Tui for NZO...-->Much more upside in the CUE SP...
later...
:cool:
.^sc
DM. Am i mising something here. What you are saying i am tell you first but then you repeat me.
1 of things things is going to happen to oil prices in the short term. continue spike, correction or a crash in oil prices. my comment was reffering to the graph that is is proably less than 5% chance that oil prices are going to trade sideways over the next 3 or 4 months. If if continues to spike the correcotion or crash will be bigger4. Simple.
If you read my posts you will see that for the sake of nzo investores medium to long term and global economy short to medium term then oil prices need to retreat to around the $100 - $120.
the rest of your post is also stating the obvious especially if you were around 25 yrs ago to see petrol prices at 99.9 cents per litre, petrol rationing, cng, lpg and so on.
MacDunk and Nita,
Agree with both your recent posts.
For stability in the world economy we want oil at US$ 110 - 120 range.
But for the moment I think its going higher -- notice both the MACD and RSI are pointing upwards and open interst is very high.
Mick100, could you give us an update on wether net open interst is short or long ?
.
http://futures.tradingcharts.com/charts/CO88.GIF
.
In case the above figure doesnt display properly, here is the url to the original website:
http://futures.tradingcharts.com/chart/CO/88
.
They wont be able to defer the profit for tax purposes if thats what your meaning. Put it in the bank, pay dividends, what ever they do, the profit will be the same, and tax will be the same.
Cam, about tax credits, they are all used up. Had only about $85 million worth if i remember right.
Royalties would certainly be under the 20% of profits rather than 5% of revenue...for every $1 profit before tax it would look like:
$1 - 30% tax = $0.70
$0.70 - 20% royalty = $0.56 after taxes and royalties.
hi Bermuda
I had hoped to buy more nzo at close trade today but the price is up and it looks as if the desperate sellers willing to give away nzo are drying up .
I still have quite a few cue left-they have gone nowhere since I bought them a few years ago .
Do you consider it would be wise to sell them and get more nzo -or would i be better buying more cue-or even ppp .
90% of my stock investments are in nzo already .
Personally i feel i should buy more nzo as the sp is almost certain to rocket soon
Bermuda / Shrewdy
You are right in saying Tui has been an outstanding start but the best is yet to come ;)
I am going back to the NZO trough on Monday morning to pick up on any price dip there may be because I think this puppy is going to run like hell next week. Momoho has to be near or at paydirt. :D
I am looking for a BIG week next week......... let the good NZO times roll
Oiler
i was about to reply to fish and say that if he sold CUE he should invest in PPP instead of NZO, then oiler posted..... and im wondering which is the better?
i have been thinking of selling NZO and putting the lot on PPP. but NZO does have an absolutely awesome ride ahead what with kupe comming on line next year, and some $400,000,000 in the kitty ....... via the option cash and tui income, and pike and kupe still to add to the cash mountain!
PPP is sitting on a pile too.... but no word about its future allocation.
gosh....... what a dillema.
Duncan - I note you tend to only join the discussion when there are down days, selective posting?
As always DYOR but as you have asked me what I would do I respond as follows.
I would Keep NZO, sell CUE and with the proceeds buy VPEO amd TEXO.( for a bit of fun )
Cue might double over time but the others will get you more leverage and a lot more fun.
Good luck. DYOR.
Look at Oiler's comment re NZO. Looking good.
Brian Gaynor has a piecs in todays hearold about the shocker 21% first half year fall.Worst half year since 1990. There were only a few rises in this period. NZO topped the few that increased invalue being the best preformer on the top 50 this half.Note PRC was not in the top 50 in this period.
For a long time, the NZO web page has said (and still says) "The 'water cut' - the amount of water being recovered with the oil - has been significantly less than predicted, allowing a high daily production rate to continue." followed by something like ... the water cut is expected to increase significantly in coming months.
However, this last statement has been removed since the time of the latest reserves upgrade. I would have thought that this could potentially be quite significant, especially for this years earnings from TUI - effectively the low year for earnings between TUI start up and Kupe coming on stream.
I would like to see some sort of explanation from NZO about the reason for the change of position and the effect on expected production from TUI, esp over the coming year.
are we still waiting on a tui upgrade ?
We have just had two very recently in the last 6 weeks but yes we are still waiting for a TUI upgrade,as will be the case for years to come.The constant "better than expected" has not been fully factored in the the SP and into general public thinking.Only time and with time the results of continued production rates once again exceeding expected and revised figures that again have to be revised up will finally bring home just how good TUI is. Remember amokura and Pateke have the same water oil level so are the same field,although the JVers are calling them seperate.Production through more time will once again call into question as to where all this extra oil is coming from,compared to the origional model.
It will be interesting for those of you that have a long horison of how we will see this in say 5 years time when most of the expected oil flows turn into historical facts.The fields are just a lot bigger than we are now modeling them.
Quote:
shrewd-I like the look of CUE... Maari for CUE will perform better than Tui for NZO...-->Much more upside in the CUE SP...
Bermuda,Quote:
bermuda-
Maari is more complicated but will perform okay with good adjacent upside.
But it wont perform better than Tui.
Tui has been outstanding from the start.
Cue might double over time but the others will get you more leverage and a lot more fun.
What Im saying is that CUE's rerate for Maari will be bigger in SP % terms than NZO's TUI...
I say this because CUE is only 23c, its market cap is alot lower, and CUE is ramping up off a much lower market cap compared to what NZO was...
I agree Maari wont perform like Tui...
CUE is just a little fish, a tadpole...
CUE will go through a ramp up process as wells come online with first production anticipated for 3rd quarter THIS YEAR, full field production 1st quarter 09... Reserves have 100% upside plus...
...
CUE will get its chance for re-rate just like NZO did... and it will be doing it with Oil prices 50% higher...
CUE have massive leverage, this ZEUS well is perhaps The most exciting Offshore Well thie year... mega TCF... lots of leverage with Exploration drilling and the same story as NZO with multiple developing projects which provide the backbone to growth over the coming years...
This stock could some day be trading at a PE of close to 1....
Im looking to get back in....
CUE has big leverage, (free carried most exciting well of the year- Zeus, BPT carry aswell), it has low downside and big up...
may not perform like some of these other beauties, but is protected...
A good portfolio settler...
NZO and those cronies held up the ensoc 107 drilling rig 5 months..
Im Talking to people who think they have missed this CSG for good...
this has only just begun...
I will post CUE from now on, on that thread...
thankyou...
:cool:
.^sc
Chaps
The big question is though what is NZO going to do with the $300 milllion? Presumably management have been planning what to do if the options were in the money for sometime and are now activating the plan.
If required they could also raise even more cash by selling part of PRC.
Do any learned posters have thoughts as to what they think the plan may be?
Appreciate your insights as along with future cash flows and borrowing ability they are sitting on a substantial war chest.
I think if you read back over the various pages of posts you will find plenty of references to this issue. In particular, read what Salisbury (CEO) said recently about their forward strategies (as distinct from what many posters might speculate on, or prefer to see).
Well, da puntzda, management have said a bit about their intentions of what to do with all this money. Some here (digger, was it?) think they may not know how to spend it wisely. But as I recall, DS has said they won't spend it just because it's there - they will be careful. Let's hope that is the case. Anyway, it's a good sort of problem to have, isn't it?
I've said before, and still reckon, that PPP might be worth looking at. Especially if (as digger says, again!) Amokura and Pateke are one field and Tui has a lot more to give.
On a different subject . . . Forbar has just been fined $30,000 and an employee $15,000 for failure to act on 'unusual' client orders.
http://www.nzherald.co.nz/section/3/...ectid=10520048
Now, was that the case, in 2006-07 where there was manipulation of the NZOG shareprice?? Someone was off-loading (bet they regret it now!) but trying to get the price up at the end of the day
Lion,
I remember those NZO share price manouvres late in the day at closing time ..... pity we dont know if the ForBar rorting was related to NZO shares.
NZX still a Wild West of a stock market !!
On the Canadian Exchanges every transaction, both buy and sell side, can be traced back to the originating brokers on a daily basis.
Why cant NZX introduce that here ??
Z
.
Found it- excellent stuff. Where mohomo 1 is being drilled is on the top of an anticline in the structure - I didn't realise this. You might have a point about KS 5 hopefully being spill due to southward migration. The site actually contains a mass of data- I just didn't see it at first. Also found the page with the catalogue of the survey shot data - massive list. Found KERRY3D but not KUPE3D - also the nutbar who developed the site just gives the directory path to the shot jpegs - but not the context. … a work in prograss.
momoho is supposed to be testing both sides of a fault incase "compartmentised" , thats why 51 days on a dry hole basis.
my guess is will reach interesting depth from about july 15 and assuming hydrocarbons then some coring as they drill deeper. kupe 4 south had about 4 cores i think.
1 core = 2 days.
again, assuming find hydrocarbons then of course the drill time will be longer.
M
Posted by tricha on PRC forum - rather relevant...
By Charlie Aitken
PORTFOLIO POINT: Oil prices won’t be dropping any time soon. Supply growth cannot keep pace with increasing demand.
The oil price has now put on $US100 a barrel since I first read the talk of an "oil price bubble" forming around $US40 back in 2004. As the price continues to move upwards, the number of "bubble" articles in the press and from analysts gets larger by the day. The whole world is attempting to be the hero who calls the "top" of the oil price, but the problem is they have been trying for the last $US100.
The question you should be asking is this: What if the oil price is not a bubble? What if the trading short positions in oil are actually larger than the long positions? I have been reading all I can on the global oil and gas markets in recent months and nothing I have read in multiple industry journals and company presentations suggests to me anything other than the oil price going to $US170 in the medium term.
Even if you don't believe my view on oil and think the oil price is $US20 overpriced from a near-term perspective, you are still talking about $US120. That is still well above consensus analysts' forecasts. It is also way above the long-term prices the market is prepared to use for valuations.
You often get some of your best ideas from the most obscure places. The latest edition of National Geographic magazine arrived on my desk last week. There is an excellent piece on the supply-side limits of the global oil industry. The first chart below tells me why the oil price is not going back to $US60–70 anytime soon. The fact is supply-side growth is declining and simply cannot keep up with the ongoing demand growth for oil.
In recent times, with the exception of some of the enormous Petrobras discoveries in deep water off the coast of Brazil (Tupi), I cannot remember reading about any enormous oil discoveries anywhere in the world. Even when a big elephant like Tupi is discovered it is in very deep water and more than 300 kilometres from the coast. It will require very costly and complex new technologies to get the oil out to the market. These new and expensive technologies only further increase the cost of production of oil, in my view, as the little guys cannot afford the huge cost of these sorts of projects.
To put it simply, it's hard to see how production growth can keep up with ongoing demand growth, which in my mind equals one thing: the oil price will go significantly higher. In recent weeks much has been made of the Saudis’ move to raise production levels but remember the Saudis have been steadily increasing production the whole way up from $US35 a barrel and it hasn’t helped the price settle down.
Saudi Arabia's King Abdullah told oil consumers on Tuesday, July 1, that they should get used to high prices and not blame the country for the spike in the price of crude. Al-Siyassah newspaper reported him as saying: "Consumer countries have to adapt to the prices and the mechanisms of the market."
The volume of global oil discovered has steadily decreased since the 1960s despite the oil industry’s technical advances over that period. Most of the big, easily discovered oil fields have been located and the oil majors are now heading into amazing new parts of the world, such as the Arctic Circle, to look for oil. Remember, the Tupi discovery off Brazil is the largest find in more than seven years, yet its estimated eight billion barrels of oil is less than 7% of the 120 billion barrels of the legendary Ghawar field in Saudi Arabia, which was discovered all the way back in 1948. The lack of mega fields being discovered means oil companies need to produce around seven million barrels of oil a day just to maintain steady output, and multiple millions more to keep up with demand growth of 1.5% a year.
National oil companies
People also forget how much oil is produced by national oil companies. Everyone seems to think that much of the world's oil comes from the super majors such as BP, Exxon, and Shell, when in reality less than 40% of the world’s oil comes from those types of companies. The majority – about 60% – comes from the national oil companies and they control about 70% of the global oil reserves.
The problem is that for so many years when crude was below $US15 a barrel, these national oil companies did not spend enough to modernise or grow their production; the return on investment was so low there was no incentive. Here we are after 20 years of underinvestment in oil production from many of those national oil companies and there are production hiccups almost every day with old equipment simply not being able to handle running flat chat in an attempt to keep up with demand. (WorleyParsons is clearly going to have work in hand for decades from these national oil companies that are now trying to pump billions of dollars into modernising ageing plants).
China: short oil and unwelcome to buy producers
The one thing China just doesn't seem to be able to find is its own oil. It even had problems trying to buy its way into the global oil production market, as shown when the US knocked back CNOOC's bid to takeover Unocal in June 2005 for $US18.5 billion. When you look at the chart below from the International Energy Agency you can see why China is just going to become a bigger and bigger importer of oil as their economy continues to develop. As much as we talk about the intensity of metal use and data such as car ownership per capita, and how those going up in China are huge for global steel and commodities demand, the latter stage of that cycle means simply Chinese moving from bicycles to cars and the flow-on effects for oil demand are enormous.
Populist policies are NOT the answer
The thing I find most amusing is politicians putting "windfall" taxes on the big oil companies. In my mind this will just further raise the cost of exploration and production of oil and I cannot see how that will do anything to lower the oil price; if anything it will have the opposite effect. We have seen people ranging from presidential candidates in the US to Kevin Rudd to local government all talking about increasing taxes on oil companies and I honestly think they have no idea what they are talking about.
It seemed ironic that Australia's Resources Minister, Martin Ferguson, was at the big Saudi oil conference the other weekend to try and push for more production after recently pushing up taxes on condensate for Australian oil and gas producers in the budget. Work it out, Martin: you can't have it both ways.
Peak oil, Peaking oil or Peking oil?
Not many chief executives of the major oil and gas companies around the world like to talk about "peak oil" because it's such a politically sensitive issue. But it's interesting to see in recent months the chief executives of some very large companies like French giant Total, US giant Conoco and even Shell talking about how global oil production will peak at about 100 million barrels a day and most think that 100 million is an optimistic number. If that is the peak number, then global oil demand will outstrip supply before 2020 and we are just going to have to live to deal with higher oil prices, significantly higher oil prices.
In "real" terms, oil isn't expensive
I always like the quotes from Peter Barker-Homek, the boss of the Abu Dhabi National Energy Company (TAQA). He was talking about how everyone is obsessed with the price of oil and says what a disaster it is, yet, in inflation adjusted terms, the price of oil has hardly moved.
When you look at the inflation-adjusted prices over a 30-year view of simple products such as a loaf of bread, a carton of milk or the like, oil has hardly moved. In inflation-adjusted terms, crude oil was almost $US20 a barrel in the late 1960s before the oil shock of the mid-1970s led to a spike. In my view, it’s hardly as though the oil price has been on some monumental price spike since the 1970s; if anything it’s playing catchup. If you buy oil and pay for it in anything other than US dollars the price is really not much higher for you in inflation adjusted terms.
I think the energy stocks – both large and small cap –are about to go for another strong run over the next six to 12 months, as well as over the longer term. In my view, a bubble forms when everybody is universally bullish on something and there is no way that could be said of crude oil. If anything I am seeing universal bearishness. The "peak oil" believers are like members of a secret sect who don't dare air their views in public, but it is looking more and more as though they will be proved right. Also, a recent survey confirmed that Australian fund managers are the most bearish ever on the energy sector.
I retain a very strong overweight in the energy space. Woodside and Santos are the clear picks at the large cap end and I think a lot of local funds are looking at Santos from a backwards looking perspective, thinking it was a boring old Adelaide-based company selling cheap gas to the eastern states plus they had an ownership cap that made them takeover proof.
Santos: don't look backwards, this is an LNG growth stock
Well how times change. The ownership cap comes off in November and Santos is now an LNG growth company. If you believe in oil prices going higher then LNG pricing is going a lot higher as well. I continue to hear multiple examples of new LNG contracts being signed at LNG pricing parity (oil price divided by six). Therefore, with the growth in LNG production that Santos has planned over coming years (north of 10 million tonnes a year of LNG production), I think at $19.94 Santos is a true growth stock and will trade well north of $30 by year’s end. Rather than getting a discounted price for their gas from local customers, it will now get global pricing via these LNG markets. This is not boring old Santos any more; this is Santos the growth stock and potential takeover target.
Clearly BHP’s petroleum division is going to be printing money and it has solid production growth coming online right now. BHP is also a beneficiary of the move towards LNG pricing parity via its interests in the North-West Shelf and other areas. The cash flows coming into BHP headquarters from the oil and gas division will be enormous and further add to the cash hoard of the company. That cash hoard will find its way back to shareholders in the form of dividend growth. Currently BHP produces about 116 million barrels of oil equivalent and we have that growing to more than 150 million by 2010. Clearly, volume growth alongside pricing growth offers huge upside for BHP. Key in long-term oil prices of $US100 a barrel and the model spits out a valuation of more than $52 billion for the petroleum division alone. As I have written numerous times before, Petroleum is the sleeping giant that has been awoken at BHP.
It is also worth considering the growing index weight of “energy” within the benchmark ASX200 index. Did you know that Woodside Petroleum now had a higher index weight than Woolworths, Wesfarmers and Westfield Group? I don't know a single investor who claims to be "overweight" Woodside.
Hi Digger et als, I considered that the most important issue for NZO with Tui was not necessarily an incremental increase in reserves BUT an update to expected production rates and hence cash flows over the near term. Most importantly for NZO, the period up to production from Kupe.
The company has been amazingly silent on this. We had been led to expect a sharp dip in earnings next financial year as Tui watered out and Kupe wasn't on stream. That dip must be becoming shallower by the day....significantly so....deserving of a revised statement to the NZX....IMO.
Bilo,
The other salient factor for cashflow going forward re Tui, is the investigation being undertaken to increase the capacity of the FPSO from 120k to 150k per day. On the current reserves estimate of 50.1m barrels, this means extraction of this amount is advanced by 7 years to 2013 instead of 2020. This won't kick in until 2010 though, so still expect a dip in cashflow from Tui for 2009.
Add to this the fact they have extended the contract on the FPSO out a further 5 years, and you'd have to say they are quietly confident on adding to reserves, from either existing or nearby or both.
Agree totally Bilo.In fact i have harped on about this before but not recently.The AGM is about 3 months away so by then we can look forward to some solid improvements in this area. If TUI is still above 42,000 or even 40,000 by then,then something in the figures will have to give big time. That is what i expect will happen.So no real income dip between TUI and Kupe.
Xerof,
If the FPSO can lift capacity to 150K liquids in the near term, this will produce an immediate lift in barrels of oil produced, and this will have an immediate effect on profitability.
Max liquids that can be handled is currently 120k, and this has been reached with oil dropping from 48-50,000 barrels to about approx 42,000 barrels or less.
So if max liquids can be lifted to 150K, then could see daily oil flow stay above 40,000k, even maybe return to near 50,000 barrels ......... but once max liquids reaches 150K then oil flow will fall off again.
In the meantime if FPSO can be modified to handle 150k liquids then this should be great for increased near term cash flows which is positive for discounted cash flow valuations etc.
Z
Z,
As I said, this won't kick in till 2010
X
The one thing i do not like the sound of is FAULT. To me it brings up a crack in the structure that lets all the oil or gas escape over millions of years.As you my have guessed i do not have a clue of how the JV's expect hydrocarbans to be there when a FAULT is also present,but they do. Naturally i hope there believe is correct,and my underlieing fear baseless.By end of next week we might be getting some hints.
sounds like the gas hasnt leaked out
Company Announcements
New Zealand Oil and Gas Limited - Announcements
NZO
07/07/2008
MINE
REL: 1612 HRS New Zealand Oil and Gas Limited
MINE: NZO: Momoho Exploration Well Disclosure Notice
New Zealand Oil & Gas Ltd (NZOG) advises that as at 7.30 am this morning the
exploration well Momoho-1 had reached a depth of 2898m and the drill crew was
preparing to pull out of hole prior to running 9 5/8 inch casing.
The well encountered good gas shows upon penetration of the primary Farewell
Formation reservoir target at 2896m.
Although the presence of gas shows is encouraging, it is not possible to
comment on their commercial significance until the well has drilled through
the entire reservoir and logs are acquired over this section.
Momoho is an exploration well 6 kms southeast of the Kupe central field, off
the coast of South Taranaki. Drilling began on 13 June 2008.
Oh, HELL yes... Great news
Good news, reading between the lines you would think they would be careful about making this statement:
"Although the presence of gas shows is encouraging"
without them being pretty happy with the results!
Market has not reacted much though..(yet)
At this price, and with extra gas to be produced from Momoho I am in the process of doing just that.
Now this may be me dreaming, but would we have expected them to reach the reservoir by now? The latest graphical chart would suggest to me that it was nowhere near it - Of course I then wonder if the reservoir is larger than originally expected?
Good call re: the pipeline Bermuda, you're onto it
NZO should issue another option for the punters. Maybe a $1.90 Dec 2011?
(Saw the drilling announcement - Wahoo, no probelmo). Anyway faults can be 'helpful' by offsetting the gas/oil bearing sandstone with a nonporous shale or whatever - unless you have a shatter zone (Wellington is full of shatter zones - and folks here have actually built houses over them, which seems a bit silly to me - - but at least they won't get oil bubbling up in the garden!) but then at depth - rock behaves more like plasticine (over geoligical time) so at 3,000 metres - maybe it's ok. Actually, come to think of it - PRC is drilling through a shatter zone at the Hawera fault - and they expect gas - so maybe you are right to shudder at the 'F' word.
have just bought more nzo-thanks to margin lending and instant funds
SP hasnt moved since the announcement =in fact seems to be increased selling pressure
Well one day the market will wake up to how good a share nzo is-in the meantime its a real steal
"good shows of gas" eh ?
Easy to be positive about that announcement as we just ease into the target zones, long way to go yet of course.
I guess there will be a flare off going on at the rig, mmmn hope Sue Kedgeley et al can't see it, then again if they could see it we end up with a good bit of nog publicity.
Blockhead likes the sound of this `
.
Quote:
"The well encountered good gas shows upon penetration of the primary Farewell
Formation reservoir target at 2896m."
Excellent news ..... and Momoho-1 is being drilled into the top of anticline .... heres hoping the gas shows (to be confirmed by electric logs) will continue downwards through the anticlinal section for 10s, or dare I say 100s, more meters of gas and ending up with hopefully an oil layer at the bottom !!
Gas floats on oil, which floats on water !!
The crucial questions will be what are the depths to the Gas - Oil Contact (GOC) and the Oil - Water Contact (OWC).
If the Momoho structure has recieved hydrocarbons like the Kupe Central Field Area, which has an oil layer below the gas, then we can expect the Momoho-1 drill to also encounter an oil layer. In support of this is the Kupe South-5 well which is just 1.2km to the south-east of Momoho-1 and KS-5 flowed 2300 bopd when it was drilled back in the late 80s.
The deeper the gas and oil water contact numbers the better, the thicker will be the gas and oil accumulations !!
Z
.
Anyone study the latest Director interest notices, released after the NZ market closed? Several directors have increased their interest through the exercise of options. Not large numbers of options held and subsequently exercised by them however.
Radfords disclosure notice is interesting. It relates to his indirect holding interests. Some options were allowed to lapse, others were sold for 2 cents. Last week a super fund in which he has an indirect interest sold NZO shares. Is this a bit of a worry? He may not have had any influence over this fund.
The momoho announcement today has had virtually no impact on the share price - a bit surprising but perhaps current shareholders are too stretched having exercised options, and potential new holders are waiting for a more definitive announcement.
Fish, I would be careful about getting too highly leveraged.
If it was good news the market didn't react mind you it was a poor day again so understandable?